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Already facing severe medical and food shortages, Venezuela is out of money and out of credit. The country issued a statement that it was defaulting on its debt, having missed its 30-day grace period on bond payments. This means investors can start seizing Venezuela, including barrels of oil that are being stored out of the country. This will make the already awful conditions there worse.

Venezuela has no other meaningful income other than the oil it sells abroad. The government, meanwhile, has failed for years to ship in enough food and medicine for its citizens. As a result, Venezuelans are waiting hours in line to buy food and dying in hospitals that lack basic resources.

If investors seize the country's oil shipments, the food and medical shortages would worsen quickly.

"Then it's pandemonium," says Fernando Freijedo, an analyst at the Economist Intelligence Unit, a research firm. "The humanitarian crisis is already pretty dire ... it boggles the mind what could happen next."

It's not immediately clear what steps bondholders will take. Argentina went through a vaguely similar default, and its bondholders battled with the government for about 15 years until settling in 2016. Every case is different, though.